Lenders Go After Macklowe Over $510M Loan

Deutsche Bank AG and other lenders are suing Macklowe Properties Inc. to foreclose on a $510 million loan the company took out to develop the site of the Drake Hotel in New York City. Macklowe bought the vintage 1920s hotel about two years ago and razed it, with plans to develop a mixed-use retail and office tower on the site. However, as reported extensively by CPN, the credit crunch has caught up with Macklowe. Last month, the company sold a number of major assets in New York–including 125 West 55th St., 540 Madison Ave., Two Grand Central Tower and 1301 Avenue of the Americas–in an effort to deal with its massive debt load. Macklowe had borrowed billions prior to the subprime meltdown to finance the acquisition of properties formerly belonging to Equity Office Properties Trust, but was later caught with few options when it came to refinancing that debt. The Drake Hotel site loan has technically been in default since late last year, but the lenders held off on foreclosure until now. In the meantime, Macklowe had been looking for an equity partner for the deal, but was evidently unable to find one. The company could not be reached to comment on this article. The move by Deutsche Bank was reported in the Wall Street Journal and other publications, citing court documents filed by the lenders. The German banking giant is having its own problems. Thus far since the worldwide financial crisis began, the bank has taken about $11 billion in write-downs. Its net income in the second quarter of 2008 was 645 million euros ($918.7 million) or 1.27 euros per share, compared with 1.8 billion euros ($2.58 billion), or 3.60 euros per share, in the second quarter 2007. Sited on Park Avenue between 56th Street and 57th Street, the Drake Hotel site was to have been an office tower with a major retail component, including possibly a Nordstrom department store, though that never materialized. The project also reportedly had trouble assembling other parcels of land nearby.